The Federal Reserve, declaring that increased economic uncertainty poses risks for U.S. business growth, announced Friday that it has approved a half-percentage point cut in its discount rate on loans to banks.<\/p>\n
The action was the most dramatic effort yet by the central bank to restore calm to global financial markets which have been roiled in the past week by a widening credit crisis.<\/p>\n
The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks will be lowered to 5.75 percent, down from 6.25 percent.<\/p>\n
The Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year.<\/p>\n
However, it has been infusing billions of dollars in money into the banking system over the past week to keep that rate from rising above the target level.<\/p>\n
Many economists believe if the financial market crisis worsens the Fed will soon move to cut the federal funds rate as well.<\/p>\n